MONTPELIER — The state agency responsible for representing utility ratepayers is being criticized by consumer and environmental groups after acknowledging it knew of a big cost increase on a natural gas pipeline project four months before it was made public.

Deep in a legal brief by the Public Service Department requesting a $35,000 fine against Vermont Gas Systems for being slow to report the revised project budget, the department said it knew a big cost increase was coming as early as March. But it didn’t make that public before the company announced it in July.

The company told the Public Service Board on July 2 that the cost of phase 1 of its project — extending its system from Chittenden County south to Middlebury — had grown by 40 percent, to more than $121 million.

In later phases, the company wants to extend its system west from Middlebury to Ticonderoga, New York, and south to Rutland.

Both department Commissioner Christopher Recchia and Sandra Levine, a lawyer with the Conservation Law Foundation, said in interviews it was the company’s responsibility to tell the Public Service Board sooner.

But Levine and Philene Taormina, director of advocacy with AARP, said the department should have notified other parties appearing before the Public Service Board in the Vermont Gas case of what it knew, and should have notified the broader public.

“They have an obligation to protect ratepayers, and they’re not letting customers know about significant cost increases,” Levine said.

And Taormina argued that the department had not taken an aggressive enough stance in defending consumers’ interests and is too strong a project supporter to provide it the proper scrutiny.

The department provided voluminous documents last week in response to a public records request by AARP, and “from March to July, the department provided no documentation that they had asked any follow-up questions as to the justification for the cost overrun,” Taormina said.

Recchia called the criticisms “really unfair.”

“We had only verbal information,” he said. “We had no data.”

Recchia said the documents turned over to AARP didn’t include discussions of the cost increase because the department hadn’t received any such documents during the period in question.

And he turned some of the blame back on the company, saying Vermont Gas knew or should have known about a national trend of sharply rising pipeline construction costs even before the board approved phase 1 of the project in December.

In its July 31 filing asking for the fine, the department said Vermont Gas had not provided an updated cost estimate from February of 2013 until last month.

“Nevertheless, the Board should be aware that VGS did inform the Department of the extent of the increase cost estimates as early as March of this year, after which the Department urged VGS to promptly make a filing with the Board,” it said.

Recchia said that even with the cost increase, the project will be good for Vermont consumers because natural gas is significantly cheaper than the heating oil many potential customers are using now, and, barring natural gas leaks, produces fewer greenhouse gas emissions.

“I don’t think anything that has occurred changes the board’s equation about whether this project is in the interest of the state of Vermont or the public good,” he said.